FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)

FOREIGN EXCHANGE MANAGEMENT ACT (FEMA) :
- Replacing the Foreign Exchange Regulation Act (FERA) the Foreign Exchange Management Act was enacted in 1999, the provisions of which are aimed at consolidating and amending the law relating to foreign exchange transactions with a view to facilitate external trade and payments and development of foreign exchange market.
- This change was brought out in the context of certain developments in the external sector like sizable increase in the foreign exchange reserve, growth in foreign trade, rationalisation of tariffs, current account convertibility, liberalisation of Indian investment abroad, increased access to external borrowings and investment in Indian stock market by foreign institutional investors.
- While FERA laid strees on conservation of foreign exchange and its proper utilisation, FEMA aims at facilitating external trade and promoting orderly development of forex market. FERA was a criminal law where as FEMA is a piece of civil law.